Exhibit
10.91


 


PURCHASE
AGREEMENT


 


THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 23rd day
of March 2004 by and among VCampus Corporation, a Delaware corporation (the “Company”),
the Purchasers set forth on the signature pages affixed hereto (each a “Purchaser”
and collectively the “Purchasers”), and Sherleigh Associates,
LLC, in its capacity as the collateral agent (together with its successors in
such capacity, the “Collateral Agent”).


 


Recitals


 


A.                                   The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by
Section 4(2) under the Securities Act of 1933, as amended (“1933 Act”),
and the provisions of Regulation D (“Regulation D”), as promulgated by the
U.S. Securities and Exchange Commission (the “SEC”) under the 1933
Act;


 


B.                                     The
Purchasers have agreed to purchase, and the Company has agreed to sell and
issue to the Purchasers, upon the terms and subject to the conditions stated in
this Agreement, 20.25 units of the Company’s securities (each a “Unit” and, collectively, the “Units”)
at a purchase price of $200,000 per Unit. 
Each Unit consists of (i) $118,500 in principal amount of the Company’s
2004 Series A Senior Secured Convertible Notes due April 1, 2009 in the
form annexed hereto as Exhibit A
(each a “Series A Note”
and, collectively, the “Series A Notes”), which Series A Notes
shall be convertible into shares of common stock of the Company, $0.01 par
value per share (the “Common Stock”), in accordance with the
terms of the Series A Notes; (ii) 50,000 shares of Common Stock (the “Unit Shares”); and (iii) a warrant
(each a “Series A Warrant”
and, collectively, the “Series A Warrants”) to purchase an
aggregate of 61,350 shares of Common Stock in the form annexed hereto as Exhibit B. 
Each Purchaser shall purchase the number of Units at the Closing as set
forth on the Purchasers’ signature page attached hereto;


 


C.                                     Certain
of the Purchasers have agreed to purchase, and the Company has agreed to sell
and issue to such Purchasers, upon the terms and subject to the conditions
stated in this Agreement, up to (i) $1,250,000 in aggregate principal amount of
the Company’s 2004 Series B Senior Secured Convertible Notes due April 1,
2009 in the form annexed hereto as Exhibit C
(each a “Series B Note”
and, collectively, the “Series B Notes”, and the Series A Notes
together with the Series B Notes, the “Notes”), which Series B Notes shall be
convertible into shares of the Common Stock, in accordance with the terms of
the Series B Notes; and (ii) warrants, substantially in the form attached
hereto as Exhibit
B (each a “Series B Warrant”
and, collectively, the “Series B Warrants”, and the Series A
Warrants together with the Series B Warrants, the “Warrants”), to
purchase an aggregate of 30,675 shares of Common Stock for each $100,000
principal amount of the Series B Notes. 
The Purchasers shall purchase the Series B Notes and the Series B
Warrants at the Closing as set forth on the Purchasers’ signature page attached
hereto; and


 

















 


D.                                    Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering (a) a Registration Rights Agreement, in the form
annexed hereto as Exhibit D
(the “Registration
Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
(b) a Security Agreement, and financing statement, in the form annexed hereto as
Exhibit E (the “Security Agreement”)
granting to the holders of the Notes a first priority lien on all assets of the
Company.


 


In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:


 


1.                                       Definitions.  In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the following
terms shall have the meanings here set forth:


 


1.1.      “Additional
Securities” means the additional Common Stock and the additional Warrants
issuable to the Purchasers in the event the Milestone is not achieved.


 


1.2.      “Affiliate”
means, with respect to any Person, any other Person which directly or indirectly
controls, is controlled by, or is under common control with, such Person, where
“control” means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.


 


1.3.      “Agreements”
means this Agreement, the Registration Rights Agreement, the Security
Agreement, the Notes, the Warrants and any other agreement entered into, now or
in the future, by the Company in connection with this Agreement or any of the
other Agreements.


 


1.4.      “Closing”
means the consummation of the transactions contemplated by this Agreement.


 


1.5.      “Closing
Date” is defined in Section 3.1.


 


1.6.      “Collateral
Agent” means Sherleigh Associates,
LLC, in its capacity as Collateral Agent under the Security Agreement,
and any successor thereto in such capacity.


 


1.7.      The
“Company” shall refer to the Company (as defined in the first paragraph
hereof).


 


1.8.      “Conversion
Price” shall have the meaning as defined in the Notes.


 


1.9.      “Disclosure
Schedule” is defined in Section 4.


 


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1.10.              “Holder” means (i) any Person in
whose name a Note or a Warrant is registered from time to time, or (ii) if the
Note or the Warrant is held by a financial intermediary for the benefit of
other Persons, such other Persons as indicated in the records of such financial
intermediary.


 


1.11.              “Material Adverse Effect” means a
material adverse effect on the (i) condition (financial or otherwise),
business, assets or results of operations of the Company; (ii) ability of the
Company to perform any of its material obligations under the terms of the
Agreements; or (iii) material rights and remedies of a Purchaser under the
terms of the Agreements.


 


1.12.              “Milestone” means the execution on
or before September 30, 2004, of definitive agreements between the Company
and at least six new “Premier Partners” for the co-publishing of content which
will be hosted by the Company, each of which agreements is expected, based upon
the good faith projections of the Company and the Premier Partner, to ramp up
to an annual rate of $500,000 of revenue for the Company by September 1,
2005.  A Premier Partner shall mean a
company that provides a credential or test, which can be ported on line, to a
membership or number of corporate enterprise employees, greater than 5,000 in a
growing global market.


 


1.13.              “Notes” shall have the meaning set
forth in the recitals to this Agreement.


 


1.14.              “Person” means an individual,
corporation, partnership, limited liability company, trust, business trust,
association, joint stock company, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.


 


1.15.              “Required Holders” means the
Holders of not less than 50% in aggregate principal amount of the Notes then
outstanding exclusive of any Notes then owned by either the Company or any of
its Affiliates.


 


1.16.              “SEC” means the U.S. Securities
and Exchange Commission.


 


1.17.              “SEC Filings” is defined in
Section 4.6.


 


1.18.              “Securities” means the Unit
Shares, Notes, Warrants, Underlying Shares and Warrant Shares.


 


1.19.              “Series A Notes” shall have the
meaning set forth in the recitals to this Agreement.


 


1.20.              “Series A Warrants” shall have the
meaning set forth in the recitals to this Agreement.


 


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1.21.              “Series B Notes” shall have the
meaning set forth in the recitals to this Agreement.


 


1.22.              “Series B Warrants” shall have the
meaning set forth in the recitals to this Agreement.


 


1.23.              “Shareholder Approval” means the
approval of the stockholders of the Company at a duly convened meeting of
stockholders, of the issuance of all the Securities and Additional Securities,
each as defined in this Agreement, including the Unit Shares, the Notes and the
Warrants.


 


1.24.              “Technology Collateral Escrow
Agreement” means the Technology Collateral Escrow Agreement, among the
Company, the Collateral Agent and DSI Technology Escrow Services, Inc., dated
as of the date hereof.


 


1.25.              “Underlying Shares” means the
shares of Common Stock issued or issuable upon conversion of, as payment for
interest under, or otherwise pursuant to, the Notes.


 


1.26.              “Unit Shares” shall have the
meaning set forth in the recitals to this Agreement.


 


1.27.              “Warrants” shall have the meaning
set forth in the recitals to this Agreement.


 


1.28.              “Warrant Price” shall have the
meaning set forth in the Warrants.


 


1.29.              “Warrant Shares” means the shares
of Common Stock issuable upon exercise of the Warrants.


 


1.30.              “1933 Act” shall have the meaning
set forth in the recitals to this Agreement.


 


1.31.              “1934 Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.


 


2.                                       Purchase
and Sale of the Units.  Subject to
the terms and conditions of this Agreement and on the basis of the
representations and warranties made herein, each of the Purchasers hereby
severally, and not jointly, agrees to purchase, and the Company hereby agrees
to sell and issue to each of the Purchasers, (a) the number of Units set forth
on such Purchaser’s signature page attached hereto at the Closing for a
purchase price of $200,000 per Unit (the “Series A Purchase Price”), and (b) the
Series B Notes in the aggregate principal amount set forth on such Purchaser’s
signature page, along with the related Series B Warrants for a purchase price
equal to the aggregate principal amount of the Series B Notes purchased by such
Purchaser  (the “Series B Purchase Price”,
and together with the Series A Purchase Price,the “Purchase


 


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Price”).  The Purchase Price shall be payable by
check, wire transfer, cancellation of indebtedness or as otherwise agreed to by
the Company and the Purchaser.


 


3.                                       Closing.


 


3.26.                        Closing
Procedure.  Upon receipt by the
Company of executed signature pages to this Agreement from Purchasers for the
purchase of 20 Units, the Company shall promptly notify such Purchasers and set
a date for the Closing, which shall be on or before March 23, 2004 or as
otherwise mutually agreed to by the Company and the Purchasers (the “Closing
Date”).


 


3.27.                        Closing
Date Deliveries.


 


(a)                                  On
the Closing Date, the Company shall deliver to the Purchasers:


 


(i)                                     The
Series A Notes in the form attached as Exhibit
A;


 


(ii)                                  The
Series B Notes, if applicable, in the form attached hereto as Exhibit C;


 


(iii)                               The Warrants in the form
attached as Exhibit  B;


 


(iv)                              The
Unit Shares;


 


(v)                                 The
executed Registration Rights Agreement in the form attached as Exhibit  D;


 


(v)                                 The
executed Security Agreement, and financing statement, in the form attached as Exhibit E and such other documents,
instruments and agreements and delivery of such property as may be necessary
or, in the opinion of the Collateral Agent, desirable to perfect the Collateral
Agent’s security interest in and on the Collateral (as such term is defined in
the Security Agreement), including, without limitation, the Technology
Collateral Escrow Agreement;


 


(vi)                              A
certificate executed by the Chief Executive Officer and Chief Financial Officer
of the Company, in the form attached as Exhibit F;


 


(vii)                           The opinion of counsel to
the Company in the form attached as Exhibit G;


 


(viii)                        All consents and waivers
required under or in respect of any agreement or instrument to which the
Company is a party or by which any of its properties or assets is bound, or


 


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under any applicable law, that are necessary or
appropriate in connection with the transactions contemplated by the Agreements,
in form and substance satisfactory to the Purchasers and the Collateral Agent;
and


 


(ix)                                A
consent to the sale and issuance of the Securities in the form attached hereto
as Exhibit  H, executed by the holders of at least 40%
of the issued and outstanding shares of Common Stock.


 


(b)                                 On
the Closing Date, the Purchasers shall deliver to the Company:


 


(i)                                     The
aggregate Purchase Price set forth on the Purchasers’ signature pages hereto
for the Units to be purchased; and


 


(ii)                                  The
executed Registration Rights Agreement.


 


4.                                       Representations
and Warranties of the Company. 
Except as disclosed in the Company’s SEC Filings (as defined below) or
in the Company disclosure schedule delivered herewith (the “Disclosure Schedule”), the Company
hereby represents and warrants to the Purchasers that:


 


4.1                                 Organization,
Good Standing and Qualification. 
The Company is a corporation validly existing and in good standing under
the laws of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and own its properties.  The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property makes such
qualification or licensing necessary unless the failure to so qualify would not
result in a Material Adverse Effect.


 


4.2                                 Authorization.  The Company has full corporate power and
authority and has taken all requisite action on the part of the Company (other
than obtaining the Shareholder Approval) necessary for (i) the authorization,
execution and delivery of the Agreements, (ii) authorization of the performance
of all obligations of the Company hereunder and thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the
Securities.  The Agreements constitute
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally and general
principles of equity that restrict the availability of equitable or legal
remedies.


 


4.3                                 Capitalization.  Set forth in Section 4.3 of the
Disclosure Schedule is (a) a description of the authorized capital stock
of the Company on the date hereof; (b) the number of shares of capital stock
issued and outstanding on the date hereof; (c) the number of shares of capital
stock issuable pursuant to the Company’s stock plans; and (d) the number of
shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Notes and


 


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the Warrants) exercisable for, or convertible into or
exchangeable for any shares of capital stock (assuming the transactions
contemplated herein have been effected solely for the purpose of computing
antidilutive provisions in any such securities).  All of the issued and outstanding shares of the Company’s capital
stock have been duly authorized and validly issued and are fully paid and
nonassessable.  No Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company.


 


4.4                                 Valid
Issuance.  As of the Closing, the
Company has reserved a sufficient number of shares of Common Stock for the
issuance of the Securities, the Additional Securities and any additional shares
issuable pursuant to the Agreements. 
The Notes, Unit Shares, Warrants, Underlying Shares, Warrant Shares and
Additional Securities are duly authorized, and such Securities, when issued in
accordance herewith and, in respect of the Underlying Shares and Warrant
Shares, pursuant to the terms of the Notes and Warrants, respectively, will be
validly issued, fully paid, non-assessable and free and clear of all
encumbrances and restrictions imposed by or through the Company, except for
restrictions on transfer imposed by applicable securities laws.


 


4.5                                 Consents.  The execution, delivery and performance by
the Company of the Agreements and, subject to the truth and accuracy of the
representations made by the Purchasers in Section 5 of this Agreement, the
offer, issuance and sale of the Securities, require no consent of, action by or
in respect of, or filing with, any Person, agency, or official, other than the
Shareholder Approval contemplated hereunder and filings that have been made
pursuant to applicable state securities laws and post-sale filings pursuant to
applicable state and federal securities laws.


 


4.6                                 SEC
Filings; Business.   The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the 1934 Act (all of the foregoing filed prior to or on the date hereof and
all registration statements and exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “SEC Filings”).  As of the date of filing of such SEC
Filings, each such SEC Filing, as it may have been subsequently amended by
filings made by the Company with the SEC prior to the date hereof, complied in
all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC
Filing.  None of the SEC Filings, as of
the date filed and as they may have been subsequently amended by filings made
by the Company with the SEC prior to the date hereof, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial
statements of the Company included in the SEC Filings complied as to form in
all material respects with applicable accounting requirements and published
rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of


 


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its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).  The Company is engaged
only in the business described in the SEC Filings and the SEC Filings contain a
complete and accurate description of the business of the Company in all
material respects.  Except as set forth
in Section 4.6 of the Disclosure Schedule, the Company has not provided to
any Purchaser (i) any information required to be filed under the 1934 Act that
has not been so filed or (ii) any material nonpublic information.


 


4.7                                 Use
of Proceeds.  The proceeds of the
sale of the Units, the Series B Notes and the Series B Warrants hereunder shall
be used by the Company for the following purposes: (a) the repayment of
indebtedness disclosed in the SEC Filings or otherwise disclosed in
Section 4.7 of the Disclosure Schedule, and (b) general corporate purposes
and working capital.


 


4.8                                 No
Material Adverse Change.  Except as
disclosed and described in the Company’s SEC Filings or in Section 4.8 of
the Disclosure Schedule, since December 31, 2002, there has not been:


 


(a)                                  any
change in the consolidated assets, liabilities, financial condition or
operating results of the Company, except changes in the ordinary course of
business which have not had, in the aggregate, a Material Adverse Effect;


 


(b)                                 any
declaration or payment of any dividend, or any authorization or payment of any
distribution, on any of the capital stock of the Company, or any redemption or
repurchase of any securities of the Company;


 


(c)                                  any
material damage, destruction or loss, whether or not covered by insurance, to
any assets or properties of the Company;


 


(d)                                 any
waiver by the Company of a material right or of a material debt owed to it;


 


(e)                                  any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company, except in the ordinary course of business and which
is not material to the assets, properties, financial condition, operating
results or business of the Company taken as a whole (as such business is
presently conducted and as it is proposed to be conducted);


 


(f)                                    any
material change or amendment to or breach or default of a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;


 


(g)                                 any
material labor difficulties or labor union organizing activities with respect
to employees of the Company;


 


(h)                                 any  material transaction entered into by the
Company other than in the ordinary course of business; or


 


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(i)                                     any
other event or condition of any character that the Company believes will have a
Material Adverse Effect.


 


4.9                                 No
Conflict, Breach, Violation or Default; Compliance with Law. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Securities and the Additional Securities will not conflict with or
result in a breach or violation of any of the terms and provisions of,
constitute a default under, require any consent, approval or filing under,
result in or require the creation or imposition of any lien or encumbrance upon
or with respect to the Company’s property under (i) the Company’s Certificate
of Incorporation (including any certificates of designation) or the Company’s
Bylaws, both as in effect on the date hereof, 
(ii) any statute, rule, regulation or order of any governmental agency
or body or any court, domestic or foreign, having jurisdiction over the Company
or any of its properties; or (iii) any material contract, loan or instrument by
which the company or its property is bound. 
The Company (i) is not to its knowledge in violation of any statute,
rule or regulation applicable to the Company or its assets or its activities,
(ii) is not in violation of any judgment, order or decree applicable to the
Company or its assets; and (iii) has not received notice from any Person of any
claim, investigation or inquiry, that, if adversely determined, would render
the preceding sentence untrue or incomplete and the Company is aware of no
facts or circumstances which could give rise to such a claim, investigation or
inquiry.


 


4.10                           Tax
Matters.  Except as set forth in
Section 4.10 of the Disclosure Schedule, the Company has timely prepared
and filed all material tax returns required to have been filed by the Company
with all appropriate governmental agencies and timely paid all material taxes
owed by it, in each case taking into account permitted extensions and
assessments challenged in good faith and disclosed in the SEC Filings.  The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company nor, to the knowledge of the Company, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits by any
federal, state or local taxing authority except such as which are not
material.  All material taxes and other
assessments and levies that the Company is required to withhold or to collect
for payment have been duly withheld and collected and paid to the proper
governmental entity or third party when due. 
Except as set forth in Section 4.10 of the Disclosure Schedule,
there are no tax liens or claims pending or threatened against the Company or
any of its respective assets or property. 
There are no outstanding tax sharing agreements or other such
arrangements between the Company and any other corporation or entity.


 


4.11                           Title
to Properties and Securities. 
Except as disclosed in the SEC Filings or as set forth in
Section 4.11 of the Disclosure Schedule, the Company has good and
marketable title to all properties and assets owned by it and material to its
operations, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made
or currently planned to be made thereof by them; and except as disclosed in the
SEC Filings, the Company holds any leased real or personal property material to
the Company’s operations under valid and enforceable leases with no exceptions
that would materially interfere with the use made or currently planned to be
made thereof by them.


 


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4.12                           Certificates,
Authorities and Permits.  The
Company possesses adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it and has not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect.


 


4.13                           No
Labor Disputes.  No material labor
dispute with the employees of the Company exists or, to the knowledge of the
Company, is imminent.


 


4.14                           Intellectual
Property.  Except as set forth in
Section 4.14 of the Disclosure Schedule, the Company owns or possesses
adequate rights or licenses to the inventions, know-how, patents, patent
rights, copyrights, trademarks, trade names, licenses, approvals, governmental
authorizations, trade secrets confidential information and other intellectual
property rights necessary to conduct the business now operated by it and
presently contemplated to be operated by it (collectively, “Intellectual
Property Rights”), free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse claims, and the
Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property Rights.  Section 4.14 of the Disclosure
Schedule includes a complete and accurate description of the Company’s
material Intellectual Property Rights, other than off-the-shelf commercial or
shrinkwrap software and excluding all software or other material that is distributed
as “free software,” “open source software” or under a similar licensing or
distribution model.  Except as set forth
in Section 4.14 of the Disclosure Schedule, none of the Company’s
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within three years from the date of this Agreement, except
where such expirations or termination would not result, either individually or
in the aggregate, in a Material Adverse Effect. To the knowledge of the
Company, the Company’s patents and other Intellectual Property Rights and the
present activities of the Company do not infringe any patent, copyright,
trademark, trade name or other proprietary rights of any third party where such
infringement may cause a Material Adverse Effect on the Company, and there is
no claim, action or proceeding being made or brought against, or to the
Company’s knowledge, being threatened against, the Company regarding its
Intellectual Property Rights, and the Company is unaware of any facts or circumstances
which might give rise to any of the foregoing. 
The Company has no knowledge of the material infringement of its
Intellectual Property Rights by third parties and has no reason to believe that
any of its Intellectual Property Rights is unenforceable, and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.  The Company has taken
commercially reasonable security measures to protect the secrecy, confidentiality
and value of all of its intellectual properties.


 


4.15                           Environmental
Matters.  The Company is not in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”), does not own or
operate any real property contaminated with any substance that is subject to
any Environmental Laws, is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and is not subject to any
claim


 


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relating to any Environmental Laws, which violation,
contamination, liability or claim would individually or in the aggregate have a
Material Adverse Effect; and the Company is not aware of any pending
investigation that might lead to such a claim.


 


4.16                           Absence
of Litigation.  Except as set forth
in the Company’s SEC Filings or in Section 4.16 of the Disclosure
Schedule, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against the
Company or any of the Company’s officers or directors in their capacities as
such, that would reasonably be expected to result in judgments against the
Company in an amount, individually or in the aggregate, in excess of $50,000.


 


4.17                           Financial
Statements.  The financial
statements included in the Company’s SEC Filings present fairly and accurately
in all material respects the consolidated financial position of the Company as
of the dates shown and its consolidated results of operations and cash flows
for the periods shown, and such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis with the Company’s past practices, except as set forth in Section 4.17
of the Disclosure Schedule.  Except as
set forth in the SEC Filings filed prior to the date hereof, the Company has no
liabilities, contingent or otherwise, except those (a) not required under
generally accepted accounting principles to be reflected in the Company’s
financial statements, (b) incurred in the ordinary course of business, or (c)
which individually or in the aggregate are not material to the financial
condition or operating results of the Company.


 


4.18                           Insurance
Coverage.  The Company maintains in
full force and effect insurance coverage that the Company reasonably believes
to be adequate against all liabilities, claims and risks against which it is
customary for comparably situated companies to insure.


 


4.19                           Brokers
and Finders.  The Purchasers shall
have no liability or responsibility for the payment of any commission or
finder’s fee to any third party in connection with or resulting from this
agreement or the transactions contemplated by this Agreement by reason of any
agreement of or action taken by the Company.


 


4.20                           No
General Solicitation.  Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D)
in connection with the offer or sale of any of the Securities.


 


4.21                           Issuance
of Securities.  The Securities and
the Additional Securities are duly authorized and, upon issuance in accordance
with the terms of the applicable agreements, shall be (i) validly issued, fully
paid and non-assessable and (ii) free from all taxes, liens and charges with
respect to the issuance thereof (other than any such taxes, liens and charges
created by any Purchaser or assignee or transferee), and shall not be subject
to pre-emptive rights or other similar rights of shareholders of the
Company.  As of the Closing, a
sufficient number of shares of Common Stock will have been duly authorized and
reserved for issuance of the Unit Shares, the Additional Securities, and upon
conversion of the Notes and exercise of the Warrants.  Upon their issuance, the Unit Shares, Additional Securities,
Underlying Shares and the Warrant Shares,


 


11

















 


as the case may
be, will be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof (other than any such
taxes, liens and charges created by any Purchaser or any assignee or
transferee), with the holders being entitled to all rights accorded to a holder
of Common Stock.


 


5.                                       Representations
and Warranties of the Purchaser. 
Each of the Purchasers hereby severally, and not jointly, represents and
warrants to the Company that:


 


5.1                                 Organization,
Good Standing, Authorization. 
If Purchaser is an entity, it is a corporation, limited liability
company, trust or partnership or other similar entity duly organized, validly
existing and in good standing under the laws of its jurisdiction.  Purchaser has full power and authority
(corporate or otherwise)_ to execute, deliver and enter into this Agreement and
the Registration Rights Agreement.  The
execution, delivery and performance by the Purchaser of this Agreement and the
Registration Rights Agreement have been duly authorized and this Agreement and
the Registration Rights Agreement will each constitute the valid and legally
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors’ rights generally and general principles of
equity that restrict the availability of equitable or legal remedies.


 


5.2                                 Purchase
Entirely for Own Account.  The
Securities (and Additional Securities, as applicable) to be received by the
Purchaser hereunder will be acquired for the Purchaser’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof and the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same.  The Purchaser is not a registered broker dealer or an entity
engaged in the business of being a broker dealer.


5.3                                 Investment
Experience.  The Purchaser
acknowledges that it can bear the economic risk and complete loss of its
investment in the Securities and has such knowledge and experience in financial
or business matters and in private placement transactions of companies similar
to the Company so that it is capable of evaluating the merits and risks of the
purchase contemplated hereby.


 


5.4                                 Disclosure
of Information.  The Purchaser has
had an opportunity to receive documents related to the Company and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities and has
received and read the SEC Filings filed via EDGAR.  Neither such inquiries nor any other due diligence investigation
conducted by the Purchaser shall modify, amend or affect the Purchaser’s right
to rely on the Company’s representations and warranties contained in this
Agreement or made pursuant to this Agreement.


 


5.5                                 Restricted
Securities.  The Purchaser understands
that the Securities (and, when issued, the Additional Securities) are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable state laws
and regulations


 


12

















 


such securities may be resold without registration
under the 1933 Act only in certain limited circumstances.


 


5.6                                 Legends.  It is understood that, until registration
for resale pursuant to the Registration Rights Agreement or until sales under
Rule 144(k) are permitted, certificates evidencing the Securities (and
Additional Securities, as applicable) may bear one or all of the following
legends or legends substantially similar thereto:


 


(a)                                  “The
shares represented by this certificate may not be transferred without (i) the
opinion of counsel reasonably satisfactory to the corporation that such
transfer may lawfully be made without registration under the Securities Act of
1933 or qualification under applicable state securities laws; or (ii) such
registration or qualification.”


 


(b)                                 If
required by the authorities of any state in connection with the issuance of
sale of the Securities, the legend required by such state authority.


 


Upon registration for resale pursuant to the Registration Rights
Agreement or upon Rule 144(k) under the 1933 Act becoming available, the
Company shall promptly cause certificates evidencing the Unit Shares,
Underlying Shares and Warrant Shares previously issued to be replaced with
certificates which do not bear such restrictive legends, and all Underlying
Shares and Warrant Shares subsequently issued shall not bear such restrictive
legends and each Purchaser will certify to the Company that it will thereafter
sell the Common Stock evidenced by such unlegended certificates only pursuant
to the Prospectus (as defined in the Registration Rights Agreement) as
permitted under the Registration Rights Agreement or pursuant to Rule 144(k).


 


5.7                                 Accredited
Investor.  The Purchaser is an
“accredited investor” as defined in Rule 501(a) of Regulation D, as amended,
under the 1933 Act.


 


5.8                                 No
General Solicitation.  The Purchaser
did not learn of the investment in the Securities as a result of any public
advertising or general solicitation.


 


5.9                                 No
Shorting.  Neither the Purchaser nor
any of its affiliates and investment partners has, directly or indirectly,
engaged in “short sales” of the Company’s Common Stock or any hedging
strategies.  Each Purchaser agrees that
on any business day prior to the time such Purchaser no longer holds any Unit
Shares, such Purchaser shall not maintain a Net Short Position.  For purposes hereof, “Net Short Position”
shall mean circumstances in which the aggregate number of shares of Common
Stock held in a short position by such Purchaser exceeds the sum of the number
of Unit Shares and the number of Underlying Shares and Warrant Shares then
issuable (without regard to any limitations on conversions or exercise) to such
Purchaser.


 


6.                                       Security
Agreement.     As security for the payment and
performance of the Notes, the Company shall execute a Security Agreement and
financing statement in the form annexed hereto as Exhibit E, granting to the Purchasers collectively, a first
lien and security interest in all of the assets of the Company.  The Company shall deliver such property and
execute such additional documents agreements and forms as may be required from
time to time to perfect and


 


13

















 


to maintain such lien and security interest on behalf
of the Purchasers, and the Company hereby designates the Collateral Agent as
its attorney in fact to execute any such documents, agreements or forms.


 


7.                                       Covenants
and Agreements of the Company and the Purchasers.


 


7.1                                 Proxy
Statement.     Within 30 days following the
Closing, the Company shall call for its annual meeting of stockholders for the
purpose of approving not only its customary annual meeting matters plus any
other agenda items determined in the Company’s sole discretion, but also the issuance
of the Securities and Additional Securities, and shall file a Proxy Statement
with the SEC, which Proxy Statement shall solicit each stockholder’s
affirmative vote at such stockholders’ meeting for approval of the Company’s
issuance of all of the Securities and Additional Securities in accordance with
applicable law and the rules and regulations of the principal market on which
the Company’s Common Stock is traded, and shall use its reasonable best efforts
to solicit and obtain its stockholders’ approval of such issuance of the
Securities and  Additional Securities
and to cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal.


 


7.2                                 Obligation
to Issue Additional Securities.     In the event
that the Company does not achieve the Milestone, and conditioned upon and
following the date of Shareholder Approval, (i) the Company shall issue to each
Purchaser, for each Unit purchased by such Purchaser, an additional 9,058
shares of Common Stock and an additional 11,113 Warrants; and (ii) the
Conversion Price with respect to the Notes and the Warrant Price with respect
to the Warrants, shall be reset in accordance with the terms of the Notes and
the Warrants.


 


7.3                                 Reservation
of Common Stock Issuable upon Conversion of Notes and Exercise of Warrants.     The
Company hereby agrees at all times to reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
providing for the full conversion of Notes (including payment of interest
thereon) and the exercise of the Warrants, such number of shares of Common
Stock as shall equal the number of shares sufficient to permit the full
conversion of Notes (including payment of interest thereon) and to permit the
full exercise of the Warrants in accordance with the terms of the Warrants.


 


7.4                                 Press
Releases.     Any press release or other publicity
originating from the Company concerning this Agreement or the transactions
contemplated by this Agreement shall be submitted to the Collateral Agentfor
comment one business day prior to issuance. No press release or other public
disclosure relating to this Agreement or the transactions contemplated by this
Agreement may be issued or made by or on behalf of any Purchaser without prior
consultation with and written consent from the Company.


 


7.5                                 No
Conflicting Agreements.     The Company will not,
without obtaining prior approval from the Required Holders, take any action,
enter into any agreement or make any commitment that would conflict or
interfere in any material respect with the obligations to the Purchasers under
the Agreements.


 


14

















 


7.6                                 Insurance.     For
so long as any Purchaser beneficially owns any of the Securities, the Company
shall have in full force and effect (a) insurance reasonably believed by the
Company to be adequate on all assets and activities, covering property damage
and loss of income by fire or other casualty, and (b) insurance reasonably
believed to be adequate protection against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Company
to insure (other than key man insurance).


 


7.7                                 Compliance
with Laws.     So long as the Purchasers
beneficially own any Securities, the Company will use reasonable efforts to
comply with all applicable laws, rules, regulations, orders and decrees of all
governmental authorities, except to the extent non-compliance (in one instance
or in the aggregate) would not have a Material Adverse Effect.


 


7.8                                 Corporate
Existence.     So long as any Notes or Warrants
remain outstanding, the Company shall maintain its corporate existence, except
in the event of a merger, consolidation or sale of all or substantially all of
the Company’s assets so long as the surviving or successor entity in such
transaction (a) assumes the Company’s obligations hereunder and under the
agreements and instruments entered into in connection herewith, regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to fulfill its
obligations hereunder and effect the conversion (including payment on) and
exercise in full of all Notes and Warrants outstanding as of the date of such transaction;
(b) has no legal, contractual or other restrictions on its ability to perform
the obligations of the Company hereunder and under the agreements and
instruments entered into in connection herewith; and (c)(i) is a publicly
traded corporation whose common stock and the shares of capital stock issuable
upon conversion and exercise of the Notes and Warrants are (or would be upon
issuance thereof) listed for trading on the Nasdaq National Market, New York
Stock Exchange or the American Stock Exchange or (ii) if not such a publicly
traded corporation, then the buyer agrees that it will, at the election of the
Purchasers, purchase such Purchasers’ Securities at a price equal to the
greater of (a) 120% of the Purchase Price of such Securities or (b) the fair
market value of such Securities on an as-converted and as-exercised basis based
on the closing price immediately preceding such transaction or the redemption
date, whichever is greater.


 


7.9                                 Nonpublic
Information.     On or before the 5th business day following the Closing Date, the
Company shall file a Current Report on Form 8-K (or include in its upcoming
filing of its Annual Report on Form 10-K due March 30, 2004) with the SEC
describing the material terms of the transactions contemplated by the Agreements
and including as exhibits to such report this Agreement, the form of the Notes,
the form of Warrants, the Registration Rights Agreement and the Security
Agreement in the form required by the 1934 Act (with such exhibits, a “Required
Report”).  Upon the filing of the
Required Report with the SEC, to the knowledge of the Company, no Purchaser
shall be in possession of any material, nonpublic information received from the
Company or any of its officers, directors, employees or agents, that is not
disclosed in the Form 8-K.  The Company shall not, and shall not knowingly
cause any of its officers, directors, employees and agents, to provide any
Purchaser with any material nonpublic information regarding the Company from
and after the filing of the Required Report with the SEC without the express
written consent of such recipient.


 


15

















 


7.10                           Purchaser
Covenants.     Each Purchaser covenants and agrees
with the Company as follows:


 


(a)                                  Confidentiality.     The
Purchaser agrees that it will not disclose, and will not include in any public
announcement, the name of the Company, unless expressly agreed to by the
Company or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.


 


(b)                                 Non-Public
Information.     The Purchaser agrees not
to effect any purchases or sales in the shares of the Company’s Common Stock
while in possession of material, non-public information regarding the Company
if such sales would violate applicable securities law.


 


(c)                                  Confidential
Information.     The Company from time to time may
disclose to the Purchaser pursuant to this Agreement certain confidential
technical and nontechnical business information (“Confidential Information”).  Notwithstanding any other provision of this
Agreement, including provisions regarding the termination of this Agreement or
particular terms of this Agreement, the Purchaser shall not disclose such
Confidential Information to third parties until the earliest of (i) the
date upon which such information ceases to be Confidential Information through
no fault of the Purchaser, (ii) the date such information is required to
be disclosed by law or a court of competent jurisdiction, or (iii) the
fifth anniversary of the date of disclosure by the Company to the
Purchaser.  In the event that the
Purchaser or any of its representatives is requested or required to disclose
any of the Confidential Information referred to above, the Purchaser will
provide the Company with prompt notice of such request or requirement so that
the Company (if it so desires) may seek a protective order.  The Purchaser further acknowledges and
understands that any information so obtained which may be considered “inside”
non-public information will not be utilized by the Purchaser in connection with
purchases and/or sales of the Company’s securities except in compliance with
applicable state and federal securities laws. 
Confidential Information shall not include information that (A) was
previously known to the receiving party prior to disclosure thereof by the
other party, (B) is independently developed without the use of such
Confidential Information, (C) at the time of disclosure to the receiving
party is, or thereafter becomes, generally available to the public other than
as a result of a disclosure by the receiving party or its representatives in
violation of this Section 7.9(g), or (D) becomes available to the
receiving party on a non-confidential basis from a third party provided that
such third party is not bound by an obligation of confidentiality to the
Company.


 


8.                                       Survival.     All
representations and warranties contained in this Agreement shall survive for
eighteen (18) months following the Closing of the transactions contemplated
hereby.


 


9.                                       Appointment
and Duties of Collateral Agent.


 


9.1                                 Appointment.   Each
of the Holders, by its execution of this Agreement, its purchase or other
acquisition of a Note or its acceptance of the benefits of this Agreement,
hereby irrevocably appoints the Collateral Agent, in each case, as its agent
and attorney-in-fact to do all of the following:


 


16

















 


(a)                                  enter
into, deliver and perform the Security Agreement, and any other instruments and
agreements securing the whole or any part of the Notes (collectively, the “Security
Documents”), and all other instruments and agreements as may now
or at any time hereafter be incidental to or in furtherance of the foregoing
(collectively, the “Related Documents”); and


 


(b)                                 to
take such other actions as the Collateral Agent shall be directed to take,
either by the terms of the Related Documents or as the Required Holders (or
such other percentage of Holders as may be required by the terms hereof or the
terms of any Related Document) may direct in writing to carry out the foregoing
and to perform the duties and obligations set forth in the Related Documents
and to effect the purposes hereof and thereof.


 


9.2                                 Acceptance
by Collateral Agent.   The Collateral Agent hereby agrees to
act as Collateral Agent for the Holders pursuant to the terms and conditions
of, and to perform its duties under, this Agreement, and the Related Documents
until the satisfaction in full and discharge of the Secured Obligations (as
defined in the Security Agreement).  By
its execution and delivery of this Agreement, the Collateral Agent accepts its
appointment as Collateral Agent and agrees to, among other things:  (i) take the actions and otherwise exercise
the rights and perform the duties described for it herein and in the Related
Documents; (ii) execute and cause to be filed all financing statements,
continuation statements and financing statement amendments, if any, at the
written direction of the Required Holders, and all other documents, necessary
or appropriate to perfect and maintain the security interest of the Collateral
Agent, for the benefit of the Secured Parties (as defined in the Security
Agreement), in the Collateral at the written direction of the Required Holders;
(iii) release Collateral in accordance with the terms of the Security
Documents; (iv) upon the occurrence of a Default or Event of Default of which
it has actual knowledge, solicit direction from the Required Holders (or all or
such other portion of the Holders as the Collateral Agent shall determine is
required) as to any disposition or other action with respect to the Collateral;
(v) effectuate any actions called for in writing by this Agreement or the
Related Documents.


 


9.3                                 Duties
and Responsibilities.   The Collateral Agent shall have only
such powers, and such duties on behalf of the Holders as are expressly set
forth herein and in the Related Documents. 
Notwithstanding any provision to the contrary elsewhere in this Agreement
or in any Related Document, the Collateral Agent shall not have any duties or
responsibilities except those expressly set forth herein and in the Related
Documents, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any Related
Document.


 


9.4                                 Delegation
of Duties, Etc.   The Collateral Agent may exercise any of
its powers and perform any of its duties hereunder or under any Related
Document by or through agents or attorneys and shall be entitled to consult
with legal counsel, accountants and other experts selected by it.  Any action taken or omitted to be taken or
suffered in good faith by the Collateral Agent in accordance with the opinion
of such counsel, accountants or other experts shall be full justification and
protection to it. The Collateral Agent shall not be responsible for


 


17

















 


any misconduct or negligence on the part of any
Collateral Agent or attorney appointed with due care by it hereunder.


 


9.5                                 Indemnification.     The
Purchasers and the Company hereby agree, severally, and not jointly, to
indemnify the Collateral Agent, in its capacity as the Collateral Agent from
and hold it harmless against any and all claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, and costs, expenses or
disbursements (including reasonable attorney’s fees and expenses to the extent
actually incurred) of any kind or nature whatsoever (“Losses”) to the extent
actually imposed on, incurred by, or asserted against the Collateral Agent in
connection with or arising out of any action taken or omitted to be taken or
suffered in good faith by the Collateral Agent under this Agreement; provided
that the Purchasers and the Company shall not be liable for any portion of any
Losses determined by a court of competent jurisdiction to have been caused by
the gross negligence or willful misconduct of the Collateral Agent.  The agreements in this Section shall
survive the termination of this Agreement and any Related Document.


 


9.6                                 Exculpatory
Provisions.     Neither the Collateral Agent nor
any of its officers, directors, employees or agents shall be liable to any
Holder or any third party for any action taken or omitted to be taken or
suffered by it or them hereunder or in connection herewith, except for its or
their own gross negligence or willful misconduct.  The Collateral Agent shall not be liable for the effectiveness,
enforceability, value, sufficiency, or validity of this Agreement, any of the
other Agreements or any item of Collateral. 
The Collateral Agent shall be entitled to conclusively rely on any
communication, instrument, paper or other document (whether in its original,
facsimile form or electronic form), including without limitation any
certificates provided by any Holder or the Company, believed by it to be
genuine and correct and to have been signed or sent by the proper parties.
Except as expressly set forth in this Agreement or any Related Document, the
Collateral Agent shall be under no duty or responsibility to ascertain or to
inquire into the performance or observance by the Company or any other party of
any of the provisions of any Related Document or any other document.  No provision of this Agreement or the
Related Documents shall require the Collateral Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.  Under no circumstance shall the Collateral
Agent be liable for special, punitive, indirect or consequential damages.  The Collateral Agent shall have no liability
for any loss arising from (i) the investment of any funds or property held in
accordance with the provisions hereof and the provisions of any Related Document,
(ii) the liquidation, sale or redemption of any Collateral or any investments
or (iii) the sale of any Collateral pursuant to the terms hereof or any Related
Document.  The Collateral Agent shall be
under no obligation to inquire into, and shall not be liable for, any losses
incurred by any Person as a result of the delivery or assignment of fraudulent,
forged or invalid Collateral which is not fully transferable or deliverable
without encumbrance.


 


9.7                                 Instructions
of Required Holders.     The Collateral Agent
shall in all cases be fully justified in acting, or in failing or refusing to
act, under this Agreement or any of the Related Documents unless it shall first
have received the written consent or written direction from the Required
Holders or, if required pursuant to the terms hereof or thereof, such other
percentage thereof, and shall have offered to the Collateral Agent security or
indemnity


 


18

















 


satisfactory to the Collateral Agent against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.  In particular,
the Collateral Agent shall be under no obligation to institute, conduct or
defend any litigation or proceeding hereunder or in relation hereto or with
respect to the Collateral, except upon the written request, order or direction
of the Required Holders.


 


9.8                                 Resignation
or Removal of the Collateral Agent.     The
Collateral Agent may resign hereunder at any time by giving 30 days’ prior
written notice thereof to the Holders and the Company, and may be removed at
any time with or without cause by an instrument in writing delivered to the
Collateral Agent and signed by the Required Holders.  Upon any such resignation or removal, the Required Holders shall
have the right to appoint a successor Collateral Agent.  If no successor shall have been so appointed
by the Required Holders and shall have accepted such appointment within 30 days
after the retiring Collateral Agent gives notice of its resignation, then the
retiring Collateral Agent may, upon not less than ten days’ notice, on behalf
of the Holders, appoint a successor Collateral Agent.  Upon the acceptance of its appointment as Collateral Agent hereunder
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring (or retired) Collateral
Agent and the retiring Collateral Agent shall be discharged from its duties and
obligations hereunder.  After the
Collateral Agent’s resignation hereunder, the provisions of this
Section shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Collateral Agent.


 


9.9                                 Amendments
of Related Documents.     The Collateral Agent
may, with the prior consent of the Required Holders (but not otherwise),
consent to any amendment, restatement, supplement, waiver or other modification
under any of the Agreements to which it is a party in its capacity as
Collateral Agent.


 


9.10                           Fees
and Expenses.     The Company will pay to the
Collateral Agent on demand from time to time the reasonable, documented fees
and disbursements of its legal counsel and such other expenses, including
documentation fees and filing fees, incurred by it in connection with the
transactions contemplated by this Agreement.


 


10.                                 Miscellaneous.


 


10.1                           Successors
and Assigns.   This Agreement may not be assigned by the
Company. A Purchaser may assign its rights and delegate its duties hereunder in
whole or in part to any Person (who is not a competitor or vendor of the
Company) to which such Purchaser has transferred or assigned all or part of its
Notes or Warrants in accordance with the terms of the Notes and Warrants,
provided in each case that such transferee or assignee acknowledges in writing
to the Company that the representations and warranties contained herein shall
apply to such  transferee or
assignee.  The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to
confer upon any party other than


 


19

















 


the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.


 


10.2                           Counterparts.   This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


 


10.3                           Titles
and Subtitles.   The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.


 


10.4                           Notices.   Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given only upon delivery to
each party to be notified by (i) personal delivery, (ii) facsimile, with
electronic confirmation of transmittal, (iii) certified mail, return receipt
requested, or (iv) an internationally recognized overnight air courier,
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days’ advance written notice
to the other party:


 


	
   

  	
  If to the Company:

  
	
   

  	
   

  
	
   

  	
  VCampus Corporation

  
	
   

  	
  1850 Centennial
  Park Drive

  
	
   

  	
  Suite 200

  
	
   

  	
  Reston, VA  20191

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Wyrick Robbins Yates & Ponton LLP

  
	
   

  	
  4101 Lake Boon Trail, Suite 300

  
	
   

  	
  Raleigh, North Carolina 27607

  
	
   

  	
  Attn:  Kevin
  A. Prakke, Esq.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  If to the Collateral Agent:

  
	
   

  	
   

  
	
   

  	
  Sherleigh Associates, LLC

  
	
   

  	
  660 Madison Avenue, 15th Floor

  
	
   

  	
  New York, New York 10021

  
	
   

  	
  Attn:                                       

  
	
   

  	
   

  
	
   

  	
  If to the Purchasers, to the addresses set forth on
  the signature pages hereto.

  



 


20

















 


10.5                           Amendments
and Waivers.  Any term of this
Agreement may be amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders.  Any amendment
or waiver effected in accordance with this Section shall be binding upon
Holders, future Holders and the Company.


 


10.6                           Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.


 


10.7                           Entire
Agreement.  This Agreement,
including the exhibits and schedules hereto, the Registration Rights Agreement,
the Notes and the Warrants, the Security Agreement and the other documents
contemplated hereby constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.


 


10.8                           Further
Assurances.  The parties shall
execute and deliver all such further instruments and documents and take all
such other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.


 


10.9                           Applicable
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York without regard to principles of conflicts of laws.


 


10.10                     Remedies.  The Purchasers shall be entitled to specific
performance of the Company’s obligations under the Agreements.


 


10.11                     Like
Treatment of Purchasers and Holders. 
The Company shall not, directly or indirectly, redeem any Securities
unless such offer of redemption is made pro rata to all Purchasers or holders
of Securities, as the case may be, on identical terms.  For clarification purposes, this provision
constitutes a separate right granted to each Purchaser by the Company and
negotiated separately by each Purchaser, and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.


 


10.12                     Actions
of Purchasers.  The obligations of
each Purchaser hereunder and under the documents contemplated hereby are
several and not joint with the obligations of any other Purchaser, and no
Purchaser shall in any way be responsible for the performance of the
obligations of any other Purchaser under any such document.  Nothing contained herein or in any other
document contemplated hereby, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute any of the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions


 


21

















 


contemplated
hereby or thereby.  Each Purchaser
confirms that it has independently participated in the negotiation of the
transaction contemplated hereby with the advice of its own counsel and
advisors.  Each Purchaser shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
document contemplated hereby, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.


 


10.13                     No Strict Construction.  The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.


 


IN
WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.


 


 


	
  The Company:

  	
  VCampus Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nat Kannan

  	
   

  
	
   

  	
  Name:

  	
  Nat Kannan

  
	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
  The foregoing
  Agreement is

  	
   

  
	
  hereby agreed to
  as of the

  	
   

  
	
  date hereof.

  	
   

  
	
   

  	
   

  
	
  Sherleigh
  Associates, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jack Silver

  	
   

  	
   

  
	
  Name:

  	
  Jack Silver

  	
   

  
	
  Title:

  	
   

  
								



 


22

















 


	
   

  	
  Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title

  
	
   

  	
   

  
	
   

  	
   

  
	
  Number of Units
  at $200,000 per Unit:

  	
   

  	
   

  
	
   

  	
   

  
	
  Principal Amount
  of Series B Notes:

  	
   

  	
   

  
	
   

  	
   

  
	
  Number of Series
  B Warrants:

  	
   

  	
   

  
	
   

  	
   

  
	
  Total Purchase
  Price (No. of Units x $200,000

  	
   

  
	
  plus principal
  amount of Series B Notes):

  	
   

  	
  $

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  with a copy to: